Customer profile of PSU banks could be the reason behind frequent transaction fails
Transaction failures on Unified Payments Interface (UPI) are on the rise, with state-run banks leading the way. However, according to National Payments Council of India (NPCI), transaction failure due to customer errors were higher than the number declines due to a technical snag.
Technical declines occur due to network or system errors, while business declines happen when a wrong pin or incorrect beneficiary account details are provided by the customer.
Seven of the 10 lenders reporting the highest number of business declines in January were state-owned entities led by Canara Bank, which witnessed 16.74% business declines and 2.14% technical failures on 81.7 million transactions, or a success rate of a little over 81% for all UPI transactions as a remitter bank. NPCI data showed that 29 of the 30 banks it provides data for saw a higher rate of business declines compared to technical failures. Only Union Bank of India reported a higher number of technical failures than declines in January.
According to experts, the customer profile of PSU banks may be the reason behind the frequent transaction failure, which is beyond lenders’ control. The average age of public sector bank customers is higher than those who have accounts in private banks, and most are relatively new to digital transacting, they added.
While covid-19 forced customers across age groups to use online payments platforms, users, especially the elderly, are finding it challenging to navigate the digital landscape. “There are gaps in digital and financial literacy in the country, and government schemes of incentives and education need to continue," said Vivek Belgavi, partner and fintech leader, PwC.
Belgavi said the next phase of growth in transactions will come from new-to-digital users who start using UPI and FASTags. “These digital pools will drive up transaction volumes. To support these volumes, digital infrastructure for banks have to be overhauled. Investment in this space has lagged due to fuzziness in cloud regulation and data localization, among others."
The Reserve Bank of India had said that a digital payment boost must be accompanied by financial literacy. The regulator said in its recent booklet on payment systems that a well-informed customer base will facilitate faster migration away from cash and paper-based payments systems. “To achieve this, it is RBI’s endeavour to enhance customer awareness through structured electronic banking awareness and training programmes, in collaboration with all stakeholders," the RBI said in a report on 25 January.
Experts said that banks must analyse the data on declines and identify patterns and causes behind it. “It is important to identify the customer demographics, usage patterns and follow the data trail with a focused team to provide detailed data analytics and meaningful inferences," said Mahesh Ramamoorthy, managing director, banking solutions, FIS India.
Industry watchers also said that the mobile apps of public sector banks are not as user-friendly as those of private-sector lenders.
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